Family and Finances: Episode 8, Part 2

The Bible also talks about steady plotting, bringing prosperity, and there's an element of patience that investing requires. Investing is a very emotionally taxing endeavor, especially if you've made some decisions and you're hopeful that it's going to grow and do real well over time. The best investors are what I call long-term value investors, and value investors pick something that they know and understand, they've researched it, they know what they're getting into, and they decide, I'm going to partner with that business, I'm going to partner with that company, I'm going to stay with them, because what you're basically doing is they're paying you back dividends based on their growth, not literally a dividend, but you're sharing their profits. And so an investment grows when you help a company capitalize their growth. A friend of mine said a few months ago, this was like earlier this year, he said, I shop at Costco, I really like Costco, I just want to own stock in Costco. Well guess what's happened to Costco? They've been booming through this pandemic, and he's just ridden that up tremendously. But it came from, he knew something about the business, he did his research, it was something that he liked the business, he wasn't gambling on Costco, he was partnering with them. And that's a long-term value investing approach. The other approaches are day trading, and those are people who try to look at trends and technicals and study charts and go in and out the same day, or the same week or the same month. And that is extremely hard. Most people that I know that do that cannot endure the emotional drag of that type of approach to investing. It's really trading. And then the third method, which I find I was into and so many other people fall into, is a form of gambling, where you're just going to take a guess. Maybe your buddy told you, hey, you need to be in this. This is hot.

That's happened to me. And everybody's doing it, and you're going to miss out, FOMO, right? And those are the worst. Just run from those. You're going to get burned almost every single time. And it is so bad that I try not to ever tell anybody what I'm investing in, because I don't want that dynamic to happen where they do it because I did it, and it's become a gamble to them. Where they do it blindly, and they're not informed, they have no purpose or basis in it. They just want the return. I remember when I started investing, a guy over a coffee said to me, how much did you return this year? And I said, man, I'm having a great year. I'm up like 17%. And he literally laughed out loud, and he said, 17%? I'm up 42%. And he made me feel terrible. Well, I could have responded to that like, how did you get 42%? And start chasing that, and start moving things around without any knowledge of how he was doing that. And I had to think, OK, 17% isn't bad. I know what I'm doing. I'm going to stay the course and not get into gambling. It's called chasing returns, where you just say, well, that stock paid a much better return last year or the last 10 years. That means it must do that in the future. No, it doesn't. And you'll find out the hard way. I've lost a lot of money investing, and I've got an MBA in the school of hard knocks in

investing. And that teaches you that God's principles are to be cherished because they really do help you. They help you get out of the emotion. They help you get out of the greed. They help you get out of the fear. Because essentially, when you, Ann and I were talking about this the other day, when you make an investment, you have to imagine you planted a little stem in the ground that's going to grow into a tree. And if you don't water and nurture it, it might die. And the storms may come and kill it. And if you uproot it too soon, it'll never yield fruit. And how many times I've made every one of those mistakes. So imagine that you say, all right, I'm planting $1,000 of a tree that I hope to grow in that company. I'm going to be vigilant. I'm going to watch it. I'm going to take care of that. I'm going to nurture it. But I'm going to endure the seasons. that it's gonna go through before it yields any fruit. And I think probably getting real practical, Calvin, there's some ways for beginners to start. Get your emergency savings in place, get the retirement fund and the match going long-term, and then set aside a little money to open a trading account. And it doesn't have to be very big. You know, those new apps, Robinhood, Acorn, Capital, some of those apps help you begin making

very, very small investments. Look, even before you do that, here's another method. Do what I call imaginary investing, phantom investing. Go online, I use Seeking Alpha, and I have a portfolio on Seeking Alpha that I track regularly that I have not invested in. And I'm studying those companies and their performance, and I'm watching them before I put money in them. And I have nothing at risk, I'm just learning. And there's some of them, I'm really glad there's no money in them, and there's others I wished, wow, I should have trusted my, you know. But I'm getting education that way. And then I have a portfolio that we do have money in. You know, there's another principle, Calvin, that where your treasure is there, your heart will be also. And that principle's so powerful in investing because I only track the stocks that I'm interested in investing in or I have money in. I'm not tracking your stocks, Calvin. My treasure is not in your stock. And so as soon as you put money into something, it galvanizes your attention. And that's when you have to be prepared to not get emotional. Most people sell low and buy high. And that's the inverse of good investing. Yeah, not a recipe for success. No, and the reason they do that, Calvin, is your emotions.

My dad in his lifetime has told me all the stocks that he has once owned, and he got out when they started falling. And if he had stayed in, we calculated his net worth would be in the multi, multi millions. But he dug up the tree. The season came when the leaves withered, and he dug it up. And he tried to put it where he thought it might grow faster or better or quicker somewhere else. And he got into that cycle of allowing his emotions to say, oops, it's falling, I'm getting out. Did you know that creates a herd mentality? And one of the problems with the apps, like if you're in Robin Hood or one of those, is there's massive herd mentality. And so people start chasing what other people are chasing. And you can watch. I'm investing in a stock that normally trades about 12,000 shares a day. One day it traded 2.5 million shares in one day. What was the change? You know what it was? The people on Robin Hood. They got onto that stock, and they traded it for one day and got out, and the next day it was trading, back to the normal level. So it was this huge tidal wave of uninformed people chasing some news. And they were investing on the daily news.

So that's what I call a gambler's mentality. Really bad philosophy. Yeah, well that's helpful, Chuck. And I think that for folks that maybe don't have a 401k or don't have a 403b, when they're hearing a lot of this and they're saying, okay, where do I actually get started with this? I love the idea of kind of the phantom investment portfolio. That's called a watch list on some apps as well, where you can kind of see where things are trading. They actually have simulators as well that you can engage with, where you can put fake money in and kind of see how it performs. That's a great way to just learn a little bit about those stocks that you're interested in, if you're thinking about buying single stocks or ETFs or things like that. But I'd love to hear, Chuck, your perspective on index funds. Where do index funds fall in all of this? Is that a helpful thing to look at? Is that something that's kind of from the past? Where does that fall into this equation? And don't let me forget to talk about gold too. And one other thing that just came to my mind, Calvin, is that I think it's really important to always agree with your spouse on your investment decisions. Anne and I discuss these things. I'm in charge of that area, but I want her input. And I want her input for two reasons. First of all, if I'm really wrong and she agrees with it,

I'm not in as much trepidation because she agreed with me. If I do it without her approval and we lose money and it divides our relationship, then I've lost both ways. So, unit. is so important in making these decisions. In fact, the second reason is God protects you. Anne has female intuition. And that female intuition, I don't have a bit of it. And I don't know, I can't explain it, but she can, without looking at the numbers or the history or any of the metrics, sort of get a feel for whether something's right or wrong or good or bad. And generally, she is right. And I've found that that's the principle of seeking counsel. And your best counselor is your spouse. And if you can't talk about this, and if it's something that's, and maybe your wife or your husband doesn't want to talk about it, but at least you've agreed that it's okay with the amount of money you want to invest and you want to, that you're both on the same page. For sure, don't get out in front of your spouse. But when it comes to index investing, one of the world's greatest investors of our lifetime, there's been a couple of them, but I actually read a lot about Warren Buffett's philosophy of investing, his approach to it.

I read notes from his annual meeting. I try to keep up with that. And I've read enough about it where I understand his investment philosophy. And Warren Buffett believes that the average investor would be better off purchasing index funds only, only, long term, as opposed to buying individual stocks. And he says when he passes his advice to his heirs is to put the money in index funds and let the market do the work for you. And that essentially means that you're going to rise on the average increase for that period of time and you're in the market. So if the market rose 5%, your index funds are probably going 5%. If that sector rose 10%, your index funds are going that. And so it takes some of the research work and some of the, if you lack knowledge, it takes some of that pressure and burden off of you. So I think they're a good idea. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you.